THE IMPACT OF FIRM-SPECIFIC VARIABLES UNDER INTEREST RATE LIBERALIZATION ON PROFITABILITY OF COMMERCIAL BANKS IN CHINA

Abstract

The study aims to investigate the impact of cost-to-income ratio (CIR), non-interest income ratio (NIIR) and non-performing loans ratio (NPL) on the profitability of the Commercial Banks in China (ROA) in the context of China's interest rate market; and help analysts to evaluate the profitability of banks based on the above variables. This research is a quantitative approach that uses secondary data. The researcher selected ten Chinese listed banks as samples.The study uses the financial statements issued by banks for the periods 2012-2016 and used quarterly data within the periods. To process the panel data and to test the hypotheses, the researcher used Eviews 9.0 software as a tool. The results revealed as follow: the proportion of NIIR has a significant positive impact on ROA. The CIR and NPL have a significant negative impact on ROA. Overall, all independent variable have a significant impact toward the dependent variable and the variation of independent variables can explain the variation of dependent variable is 63.8 % (Adjusted R-Squared = 0.638).